Value
Is (Systematic) Value Investing Dead?
March 14, 2020
Undoubtedly, many systematic approaches to value investing have suffered recently. However, we find the popular suggestion that value investing is dead to be premature. We find expectations of fundamental information have been and continue to be an important driver of security returns.
Fixed Income
(Systematic) Investing in Emerging Market Debt
March 4, 2020
We extend the analysis of systematic investment approaches to emerging market (EM) fixed income. We find that systematic exposures linked to carry, defensive, momentum and valuation themes are well compensated and lowly correlated in EM markets, and that a systematic approach to EM debt may be a powerful diversifier.
Tax Aware
Tax-Efficient Portfolio Transition: A Tax-Aware Relaxed-Constraint Approach to Switching Equity Managers
March 2, 2020
For a taxable investor with a highly appreciated equity portfolio, replacing the portfolio manager is likely to trigger substantial tax liabilities. We find that a tax-aware relaxed-constraint post-transition strategy significantly outperforms a traditional tax-agnostic long-only strategy in its ability to preserve and grow the investors after-tax wealth over the long term.
Leverage
Beyond Basis Basics: Leverage Demand and Deviations from the Law of One Price
February 7, 2020
Bases are driven by intermediaries’ cost of capital and the amount of leverage demand for an asset. Focusing on leverage demand, we find bases negatively predict futures and spot market returns with the same sign in both global equities and currencies.
Machine Learning
Predicting Returns with Text Data
December 19, 2019
We introduce a new text-mining methodology that extracts sentiment information from news articles to predict asset returns.
ESG Investing
Responsible Investing: The ESG-Efficient Frontier
October 10, 2019
Combining several large data sets, we compute the empirical ESG-efficient frontier and show the costs and benefits of responsible investing.
Market Risk and Efficiency
Economics with Market Liquidity Risk
September 19, 2019
We discuss the effects of market liquidity risk on asset pricing, investment management, corporate finance, banking, financial crises, macroeconomics, monetary policy, fiscal policy, and other economic areas.
Working Paper
Risk Parity Is Not Short Volatility (Not That There's Anything Wrong with Short Volatility)
August 21, 2019
Are risk parity strategies hiding an implicit short volatility? To find out, we simulated stylized versions of three asset-class (equity, fixed income, and commodities) risk parity and short volatility strategies, and we compared the trading behavior and returns of each.
Factor/Style Investing
How Do Factor Premia Vary Over Time? A Century of Evidence
July 2, 2019
We examine four prominent factor premia – value, momentum, carry, and defensive – over a century from six asset classes. The results offer support for time-varying risk premia models with important implications for theory seeking to explain the sources of factor returns.
Fixed Income
Looking Under the Hood of Active Credit Managers
July 1, 2019
We find that credit long/short managers tend to have high passive exposure to the credit risk premium. In contrast, we find that high-yield-focused long-only managers provide less exposure to the credit risk premium than their respective benchmarks.